Correlation Between Knowles Cor and SigmaTron International

Can any of the company-specific risk be diversified away by investing in both Knowles Cor and SigmaTron International at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Knowles Cor and SigmaTron International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Knowles Cor and SigmaTron International, you can compare the effects of market volatilities on Knowles Cor and SigmaTron International and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Knowles Cor with a short position of SigmaTron International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Knowles Cor and SigmaTron International.

Diversification Opportunities for Knowles Cor and SigmaTron International

0.26

Correlation Coefficient

Knowles Cor  SigmaTron International

Modest diversification

The 3 months correlation between Knowles and SigmaTron is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Knowles Cor and SigmaTron International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SigmaTron International and Knowles Cor is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Knowles Cor are associated (or correlated) with SigmaTron International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SigmaTron International has no effect on the direction of Knowles Cor i.e., Knowles Cor and SigmaTron International go up and down completely randomly.

Pair Corralation between Knowles Cor and SigmaTron International

Allowing for the 90-day total investment horizon Knowles Cor is expected to generate 0.61 times more return on investment than SigmaTron International. However, Knowles Cor is 1.65 times less risky than SigmaTron International. It trades about 0.1 of its potential returns per unit of risk. SigmaTron International is currently generating about -0.01 per unit of risk. If you would invest  1,739  in Knowles Cor on September 1, 2024 and sell it today you would earn a total of  207.00  from holding Knowles Cor or generate 11.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Knowles Cor  vs.  SigmaTron International

Knowles Cor

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Knowles Cor are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Knowles Cor may actually be approaching a critical reversion point that can send shares even higher in December 2024.

SigmaTron International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SigmaTron International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, SigmaTron International is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Knowles Cor and SigmaTron International

The main advantage of trading using opposite Knowles Cor and SigmaTron International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knowles Cor position performs unexpectedly, SigmaTron International can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in SigmaTron International will offset losses from the drop in SigmaTron International's long position.

The idea behind Knowles Cor and SigmaTron International pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.